i know you all hate these kinds of posts but what the heck. from 2000-2002 the dow dropped 3,000 points from 11,000 to 8,0000/ in just 2 months,the dow already dropped 2 thousand points. to me,thats pretty darn amazing. sorry for the ramble but i am not trading today and i just thought about this.
I suppose there are 2 many hedge funds on the same side of the market, and they all had to go for the exit together :eek: this is insane.. so far we only are seeing hints of a slow down, and everybody freaks out.
More money being managed. More hedge-funds. More program trading activity, AND no uptick rule for shorting anymore. That is what accelerates the moves these days. Pretty simple.
9-11 fucked me up in that time. I for one was scared shitless holding long positions. In the back of head I head, I just said buy and hold as the market will rebound. I would buy good blue chip stocks beat to a pulp, get excited to see a rally, get scared take profits. Market feels like the same mentality now...
this increased volatility definitely presents a lot of profitable opportunities. let the hedge fund black boxes battle each other. these computers are just poking around all day, and trying to figure out where the 'trip wire' is. So far this week, all the trip wires are on the way down but from valuation based investing standpoint, if you have a long enough horizon, the odds of going up 1000 pts from here definitely overweighs the odds of going down 1000 pts further. At the time of a credit crunch, the last leg of the down move is usually caused by 'lack of resources', meaning investors have to sell to get cash. the bear market from 2000 to 2002 was a no brainer, stocks were way over valued. right now, stocks are way undervalued considering 10 year yields.
I think it's always good to remember that markets tend to overshoot to the upside and to the downside. That makes picking tops and bottoms and fools game.
http://www.cxoadvisory.com/blog/internal/blog12-06-07/ this article was written in december of 2007. since then, stocks have been dropping, as well as t-bill/note yields. so what is the market saying here? will long term interest rates rise SIGNIFICANTLY? will companies revise earnings down SIGNIFICANTLY? or maybe the market is just in a tail spin and not really saying anything rational.
dozu888, good link there. I am curious to see what market dynamics unfold should earnings not come in 50% under expectations for the full year of 2008.
Though there seems to be universal agreement that the internet bubble saw stocks get wildly overvalued, i think you'll find differences of opinion regarding whether the present market is "way undervalued" It depends really on whether you think that historical P/E ratios should no longer hold and that there is a new paradigm. I for one am a bit old fashioned and view the present market as close to its historical average P/E of 15. The market now is somewhere near there, so from my perspective it is not "way undervalued." In fact it might fairly be said to still be a little overvalued depending on how you want to treat the write-downs in the financial industry. When markets become way over or way undervalued they have a way of letting us know. It's not clear to me what you mean by "10 year yields". I assume you are referring to the next ten years rather than the 10 years just past. If you know what stocks will yield in the next 10 years, please tell us.